The FINANCIAL — A.M. Best has released two new Best’s Special Reports on the life/health (L/H) and property/casualty (P/C) industries. The L/H special report titled, “U.S. Life/Health Insurers See More Positive Rating Actions in 2014,” probes into the rating activity among domestic L/H carriers’ issuer credit ratings (ICR) through mid-year 2014, comparing it with the same period for 2013 and finding a slight increase in affirmations and a continuation of the same positive rating trends as was reported last year. Upgrades outpaced downgrades, but by a higher margin through the first six months of 2014 versus the same period in the prior year. This activity occurred despite the challenging environment for U.S. L/H insurers given heightened regulatory oversight and persistent low interest rates, according to A.M. Best Company, Inc.
On a rating unit basis, A.M. Best reported 23 upgrades and only two downgrades among L/H carriers through June 30, 2014. Upgrades were almost evenly divided between the life/annuity and health segments, while the two downgrades occurred in the life/annuity segment. This compares to 16 upgrades and five downgrades reported through the same period in 2013. Last year, the health segment reported slightly more upgrades than the life/annuity segment, while downgrades were almost evenly divided between the two segments. Nevertheless, the vast majority of rating actions over the past six months were affirmations, consistent with the last few years and, more importantly, A.M. Best’s ratings outlook on the U.S. life/annuity and health sectors.
A second special report titled, “U.S. Property/Casualty Industry Sees Positive Rating Activity in 2014,”said that positive ICR activity has continued for the U.S. P/C industry during the first six months of 2014. Upgrades outnumbered downgrades, by a count of 26 to 15, despite the Polar Vortex’s chilling impact in the first quarter of 2014 and the widespread hail and wind events during the second quarter–including an EF-4 tornado that struck Pilger, NE. This positive six-month rating activity follows the same pattern for the same six-month period in 2013.
In the first six months of 2014, A.M. Best took rating actions on the ICR of 488 units. Although the total number of rating changes decreased–to 52 in 2014 from 73 in 2013–86.6% were rating affirmations, a five-year high.
Overall, this positive rating activity reflects improving economic conditions; however, these trends have the potential to moderate in both the U.S. L/H and P/C sectors, particularly given the continuing low investment yields, according to A.M. Best Company, Inc.
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